Europe agreed to drop its threat to impose sanctions on the likes of Huawei and ZTE by signing a deal with China that forces the latter to address certain concerns about subsidies provided to the two companies.

"The EU and China have resolved the telecoms case," the EU's Trade Commissioner Karel De Gucht said in a statement provided to Reuters. "The investigation into mobile telecommunications networks from China will not be pursued,"

The row stemmed from the EU’s belief that Huawei’s swift rise in the European telecoms equipment sector from a 2.5 per cent market share in 2006 to a 25 per cent share could only have been achieved with state aid, which is illegal according to global rules.

"We believe that an open competitive environment is ... a major benefit to consumers who gain access to more advanced and innovative services at competitive prices,” read a statement from Huawei.

De Gucht explained that a deal was reached on 18 October, a day after Chinese Premier Li Keqiang had met senior officials at a summit in Milan, and it follows over a year of discussions between both sides.

Beijing has apparently agreed to talk about limiting export credits given to Chinese companies that will bring state support for companies in line with stringent international rules and thus eliminate the state aid accusation.

The same discussions have also resulted in the appointment of an independent authority to oversee the market share of Chinese companies in Europe and European firms in China.

Chinese imports are extremely important to the EU and total some £790 million per year with many companies opting to use telecoms equipment that is cheaper than that made by European companies such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent.